A lot has been written about the Baby Boomer generation, whose moniker came from the explosion of births following World War II. This large portion of the population is heading into or is currently in retirement with ages ranging from 53 to 71 in 2017.For decades, financial planning has concentrated on preparing and saving for retirement. With the ongoing elimination of pension plans, this generation has become more responsible for their own golden years. With 401k and Individual Retirement Accounts being the majority of this generation’s retirement income, they are dependent on their own savings more than ever before.

While much has been written about and researched on what is needed to save for retirement and the returns and the allocations needed to reach the golden years, the art of the distribution period is just as -- or more -- important. Whatever your plans, taking money in the right manner from the recommended assets at the right times can lead to a more successful (read: not run out of money) retirement. Vanguard’s research, “Putting a value on your value: Quantifying Vanguard Advisor’s Alpha®”, indicates appropriately planning distributions from various retirement assets and plan types (e.g. IRA, Roth, etc.) can add up to 110 bps or 1.10 percent to portfolio returns. This varies by individual circumstances.

Retirees with the most varied assets (tax-deferred, which means an IRA, 401k, etc.; taxable, which means a non-retirement account; and tax-free, which means a Roth IRA) will gain the most advantage from planning which assets should be pulled from because they have the most options.

On a side note, this is why it is nice to save in various ways before retirement so you have greater options afterward.

The first step in creating a plan is to analyze all possible sources of income for retirement. Many times investors don’t look at the overall picture. This includes but is not limited to social security, pensions, rental income, part-time work and invested assets. Hopefully during retirement planning, income estimates were made of how much can be pulled annually to maintain your lifestyle.

Social security timing is an essential piece of most middle-income retirees’ cash flow in retirement. Social security can be taken anytime between 62 to 70 years of age and studies show waiting can be incredibly advantageous. For a person with longevity in their family, claiming at 70 can substantially increase the overall benefit received in their lifetime. Full retirement age is between 66 and 67 for upcoming recipients and the increase annually between full retirement ages to 70 is estimated at 8 percent for most. If someone told you that if you left your money in an investment you could earn 8 percent guaranteed for three years, would you do it? Everyone is different, but typically pulling from other assets if possible and waiting on social security is the best avenue for people who expect to live past 80.

Annuities and pensions provide another source of guaranteed lifetime income. Planning when and how these are paid is vital to your long-term needs. I am not a fan of annuities but if you have one, it can be used to create a fixed stream of income throughout your life. This is actually what they are created to do and what their extra fees are paid to create. Sit down and talk with your annuity broker to see what might be the aspect of your annuity that will work best for you (guaranteed maximum payout at some date or age). Annuities are complicated products so be sure you are making an educated decision when deciding on the payout. A word of caution: once you annuitize (set up the lifetime stream of income), typically you lock your principal away forever. If you do not have other assets to use for inflation or emergencies, it is probably best not to lock into an annuity at all. Often pensions can be made payable to the owner or to both the owner and the spouse. Once the decision is made, there is no changing it later so determine what works best for your family situation from the outset.

In general, the next steps are to pull in the following order: required minimum distributions (RMD) if you are over age 70 ½, taxable accounts (joint, etc.), tax-deferred retirement accounts (traditional IRA, 401k) and finally tax-free accounts (Roth). The theory behind this is that you allow for longer tax-deferred growth. However, everyone’s situation is different. If you believe your tax rate might be lower now than later (think of the possible lower income tax rates promised by our new president) it might be in your best interest to....

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